Will Redbox’s 25% Price Hike For DVD Rentals Hurt Its Bargain Image?

The jump to $1.50 per night from $1.20 takes effect on December 2, it says this morning. And while that’s still just pocket change, it could make some consumers question whether it’s worth the trek to a local kiosk instead of staying home and paying a bit more to queue up a movie on a cable, satellite, or streaming VOD home entertainment service. Redbox last raised the price of its once-famous $1-a-night DVD rentals in 2011. It notes this morning that prices “may vary in certain places.”

In addition to the change for DVDs, Redbox will increase the price of Blu-ray disc rentals to $2 from $1.50. Video games will go to $3 from $2 beginning January 6. This is the first time the company has raised the rental price for Blu-ray and games.

Related Story

It probably will depress the number of rentals in Q1, Redbox parent Outerwall warns investors. Still, it says in a release, the increase will help “offset future declines in the physical rental market.”

“Redbox remains the best value in new-release home entertainment,” Outerwall CEO J. Scott Di Valerio says. “Consumers can continue to expect access to the newest movies months before streaming subscription services and daily prices that are still lower than Video On Demand, The pricing adjustments announced today will allow Redbox to continue to offer consumers high quality movies and games while making investments to enhance the customer experience.”

Some analysts were more skeptical as they saw the company test higher pricing. “While we can understand the need to use price increases to offset the secular decline in disc rentals and expected margin pressures on the horizon, given Redbox’s past experience (with the October 2011 price hike) and recent demand trends, we continue to believe any benefit would be short-lived and could actually drive more detrimental longer-term usage shifts (i.e., to other formats),” B. Riley’s Eric Wold wrote in late October.

This has been a tough year for Redbox. Last month Outerwall pulled the plug on its Redbox Instant By Verizon streaming joint venture. Then the company blamed “a weak release schedule… and the unfavorable timing and mix of content released” in Q3 for Redbox’s anemic financial performance in Q3, with little improvement expected in Q4.